Commentary: A look at fraud facts and figures.

Byline: Tracy L. Coenen

One of the most comprehensive fraud studies undertaken every two years is done by the Association of Certified Fraud Examiners (ACFE). The Report to the Nation on Occupational Fraud and Abuse was originally released in 1996, and there have been several updates including the current release.

As a bit of background, the ACFE is headquartered in Austin, Texas, and has over 37,000 members worldwide. About 80 percent of the members are in the United States, 10 percent are in Canada, and the remaining 10 percent are in 120 countries around the globe. The organization exists to provide antifraud training and certification.

The Certified Fraud Examiner (CFE) designation is the most-widely recognized, bona fide anti-fraud credential. It is obtained by successfully completing a rigorous application and testing process. Only about 30 percent of the organization's members have obtained the CFE designation, and these members were surveyed for the study.

The Report to the Nation is based upon 1,134 frauds investigated by CFEs, and closely examines the types of fraud that occur, who commits the frauds, and the victim organizations. Each CFE completed an extensive questionnaire about a fraud she or he investigated, and the data was compiled by the ACFE.

An Environment for Fraud

Occupational fraud, also known as internal fraud or employee theft, occurs because employees are trusted. Businesses could not operate without employees who are trusted to carry out duties on behalf of the owners.

Employees become familiar with operations and may discover the gaps in the system. The more familiar they become with the business, the easier it will be to commit and conceal a fraud.

The workplace environment itself helps increase the incidence of fraud. Things like outsourcing and virtual offices have helped to decentralize companies and the level of supervision is naturally decreased. Reduced employee loyalty and insufficient controls over processes add to the risk of fraud.

The Fraud Schemes

Internal frauds fall into three categories: asset misappropriation, corruption and bribery, or financial statement fraud. It is not unusual for a fraud scheme to fall into more than one category, so you'll see that the percentages below exceed 100 percent in total.

Asset misappropriations are the most common type of internal fraud, occurring in over 90 percent of fraud schemes. This crime deals with the theft of money or goods from the employer. Typical...